Lazard Sees Distressed Deals on Tap for Argentina as GDP Suffers

(Bloomberg) -- Argentina’s economic woes may spell the end of traditional mergers and acquisitions this year, while paving the way for some companies to snap up battered assets, according to Lazard Ltd.’s Matias Eliaschev.

“Currency volatility, increased country-risk spreads and general turmoil in emerging markets will make closing transactions more challenging,” Lazard’s chief executive officer for Latin America, excluding Mexico and Brazil, said in an interview. Still, “this environment is likely to encourage more financial restructuring and distressed M&A activity.”

South America’s second-largest economy was heading to recession even before a wide ranging corruption scandal broke this month, threatening to further curtail investment in a country where industrial production slumped 8.1 percent in June from the year earlier. Among deals that had been in the works were a group of banks divesting Prisma Medios de Pagos SA, the local operator of Visa, and YPF SA unloading its stake in Metrogas SA, the country’s largest gas distributor.

Goldman Sachs Group Inc. began efforts to sell Prisma in the first half of the year, while YPF mandated Citigroup Inc. to sell its 70 percent stake in Metrogas last year. Eliaschev declined to speculate on any specific companies that may be affected by the current turmoil.

The economic economic slowdown and fast-expanding corruption scandal have sent the average overseas borrowing cost for Argentine companies to 10.25 percent from 8.50 percent at the beginning of the month, according to data compiled by Bloomberg. With not even blue-chip names like YPF and Telecom Argentina SA having access to the global debt markets, yields for smaller issuers have fallen into distressed territory.

Companies that struggle to find financing “could be forced to sell,” Eliaschev said. “Opportunistic buyers and strategic players with a long-term view may find themselves with an attractive pipeline of Argentine assets in the next 6 to 12 months.”

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